Land value capture is used in Mexico but not systematically (Table 2.36). States and local governments use only developer obligations on a regular basis and the revenues are low. There are significant differences in land value capture instruments’ use, the legislations and revenues raised across states and local governments. Two main obstacles limit land value capture’s use. First, property rights are considered untouchable, which reinforces resistance. The political cost of introducing land value capture instruments is high. Second, weak legal frameworks and fiscal regulations at the state level hamper implementation at the local level. The 2016 General Law on Human Settlements, Regional Management and Urban Development (LGAHOTDU) mandates states to update their legislations to include several land value capture instruments.

Mexico is a federal country with three levels of government: the national level, 32 federated states and 2,463 municipalities (OECD, 2022[3]). Compared to other federal countries, the national government is an important land use actor (OECD, 2017, p. 148[2]). Mexican states have fewer powers. Municipalities are the main planning authorities and can decide on land use. Most importantly, they develop land-use plans that control land-use changes and decide whether to issue building permits (ibid). Local officials have high discretion when issuing building permits. Building permits for large developments are granted by state governments and for example take into account environmental considerations.

According to Article 27 of the Constitution, all land belongs to the nation. As such, the state has the right to limit the use of private property rights in the public interest. But in practice, property rights are very strong. Article 115 allows local governments to charge increases in real estate values. The national government and state levels are responsible for creating the legal framework for land value capture.

Developers are subject to obligations (donaciones y cesiones) to obtain approval for new development. The obligations are designed to compensate the cost of stronger public infrastructure and services use resulting from private development. States and local governments implement them and receive the revenues.

Set rules determine the type and amount of the obligations. In most states, developers must provide a share of their developed land to local governments, states or both. States and local governments use this land to provide the public roads, utilities and green spaces private development requires. On average, developers provide 10% of their developed land. In a few states, for example the capital city Mexico City, the land provision can be replaced by an equivalent cash payment. However, this is usually agreed through untransparent negotiations. Developers can also directly provide public infrastructure, such as public roads, utilities, schools and green space, to meet the obligations.

Occasionally, developers may also be subject to obligations to obtain approval for densification or exceptions from urban planning regulations. These obligations consist of cash or in-kind payments. Many states and local governments use them since their appearance in the 1996 Urban Law of Mexico City. However, due to dysfunctional legislation and unclear development regulations, they raise little revenue.

The latter obligations are mostly negotiated between states or local governments and developers. In a few cases they are calculated using a fixed formula. When formula-based, the charge takes into account the cost impact, size and type of development. Small developments, for example adding a floor to an existing house, can be exempt.

The 2016 General Law on Human Settlements, Regional Management and Urban Development (LGAHOTDU) mandates that updated state legislations include developer obligations.

Landowners pay a levy for infrastructure built by the government and from which they specifically benefit, for example public roads, utilities, schools and green space. Local governments receive the revenues from the levy, but require the approval from states to implement it. Although the infrastructure levy exists since the 1980s, it is rarely used.

In principle, the levy amounts to 50-100% of the estimated cost of public works. In practice, it raises very low revenues and many local governments do not cover any of the public works’ cost.

For the levy to apply, public works must typically benefit a minimum number of landowners. For example, in the state Sinaloa, 51% of benefiting landowners need to consent to public infrastructure projects and the associated levy. At the local level, a fixed impact radius based on the type of public work usually identifies landowners who will benefit and be charged. For example, in Mexico City, landowners within a 500-metre radius of infrastructure works pay the levy. At the state level, the inclination is to identify benefiting landowners by estimating the increase in land values public works generate. However, state legislations have not yet regulated this, except in rare cases like Querétaro and Aguascalientes.

Landowners then pay the levy according to a fixed formula, based on the distance to the new infrastructure, location and size of their properties. The levy is charged upon completion of public works, except in the state Sinaloa where it can be charged in advance. If public infrastructure is not provided as originally planned or within the due date, the money is returned to landowners. Several payment exemptions apply. For example, this is the case in Mexico City when public works benefit lower-income landowners or the whole city instead of specific properties. Landowners usually challenge paying the levy in court or cannot afford paying it.

National law allows municipalities to increase density development rights in local plans. Developers who want to build beyond the density established in the local plan should pay for the cost of stronger public infrastructure and services use resulting from densification. Such charges for development rights have been considered since 2010. For instance, they were included in the urban development plans in 2012 in Sinaloa state’s three main municipalities, in 2015 in the city Santiago de Querétaro, in 2018 in the city San Juan del Rio, as well as in other cities. However, three obstacles blocked their use:

  • The absence of legislation at the state level allowing local governments to charge for development rights;

  • Local governments’ lack of administrative capacity, for example to set the charges;

  • Opposition from developers.

    The municipalities Zapopan, Guadalajara, Santiago de Querétaro and a few others have managed to implement charges for higher density development rights without state-level legislation. However, the charges are based on weak municipal legal dispositions and estimation methods. Most municipalities prefer negotiated developer obligations for densification projects (see section above).

Transferable development rights are also used in a limited way. In major cities, transferable development rights exist in the law but are not applied, while some municipalities use them with weak legislation. Mexico City charges for transferable development rights on an ad hoc basis during the processing of discretionary development applications. In Mexico City, a formal system of transferable development rights applied from 1988 until 2010. Developers could buy development rights attached to plots with historical buildings that could not be developed because of preservation policies and transfer them to other plots better suited to greater density. The revenues were earmarked for the city centre’s restoration. However, the instrument was abandoned due to corruption.

Since the 2016 General Law on Human Settlements, Regional Management and Urban Development (LGAHOTDU), several states have included (Aguascalientes, Sinaloa, Quintana Roo, Jalisco) or are including transferable development rights in their legislations. The state Jalisco has a strong legal basis for the instrument.

Strategic land management is used to create land reserves (reservas territoriales) for urban development and housing, discourage land speculation, reduce illegal occupation of land through the provision of serviced plots for the lowest-income population, and promote tourism and strategic projects such as the construction of highways. All levels of government have powers to apply it and receive the revenues. The Institute of Administration and Appraisals of National Assets, a decentralised body of the Ministry of Finance and Public Credit, manages nationally-owned land. Special agencies administer land within the jurisdiction of state and local governments. Strategic land management dates back to 1968 and is part of the Mexican urban planning paradigm. However, it is rarely used. The most prominent cases were in the cities Aguascalientes and Puebla more than ten years ago.

Land is retained for ten years on average, rezoned and developed by the government, which raises land prices. It is then sold at market price to the highest bidder; at a predetermined price to the preferred buyer; or transferred to another public entity. The government recovers investments in land purchase and development through the sale of rezoned and developed plots.

On the basis of the 2016 General Law on Human Settlements, Regional Management and Urban Development (LGAHOTDU), most states have introduced innovations about strategic land management in their legislations.

Land readjustment (reagrupamiento parcelario) has not yet been used but has a legal basis. Now that most states are updating their legislations in line with the 2016 General Law on Human Settlements, Regional Management and Urban Development (LGAHOTDU), they are including land readjustment (Quintana Roo, Oaxaca, Sinaloa), albeit in an unspecific way. The legislation of Nuevo León state includes land readjustment since 1999 and served as the basis for articles on land readjustment in the 2016 General Law.


[3] OECD (2022), “Subnational government structure and finance”, OECD Regional Statistics (database), (accessed on 13 January 2022).

[8] OECD (2021), “Subnational government structure and finance”, OECD Regional Statistics (database), (accessed on 25 November 2021).

[2] OECD (2017), Land-use Planning Systems in the OECD: Country Fact Sheets, OECD Regional Development Studies, OECD Publishing, Paris,

[1] OECD/UCLG (2019), 2019 Report of the World Observatory on Subnational Government Finance and Investment - Country Profiles, OECD/UCLG.

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